Paul Fletcher MP

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Remarks at the launch of the Vodafone/McKell Institute Report, ‘Superfast Broadband: The Future is in Your Hands’

Portfolio Speeches Wednesday, 06 November 2013

Thank you, Bill Morrow, CEO of Vodafone for that generous introduction.

To you, to Michael Gordon-Smith, to Peter Bentley, Executive Director of the McKell Institute, to my parliamentary colleague Michelle Rowland, ladies and gentlemen, I am very pleased to be here today on the occasion of the launch by Vodafone of this report, commissioned from the McKell Institute and written by well known communications industry figure Michael Gordon-Smith, regarding mobile broadband and its interface with the NBN.

I commend Vodafone on issuing today’s report which is an important contribution to debate on this key public policy issue. As a politician I cannot help observing that their particular choice of think tank appears to have been made with the previous government in mind, but I emphasise that ours is a government which is interested in calmly understanding the facts and the message, and that is of more interest to us than the particular messenger you have chosen to use.

Now under the previous regime the expression of independent perspectives on broadband and communication policy was a highly risky exercise, carrying with it the risk of being subjected to rapid thought-correction from the Minister of the day.

Indeed earlier this year, after Bill Morrow penned an opinion piece in the Financial Review on the subject of competition in the mobile sector, particularly in rural and regional areas, he and Vodafone were the subject of a strident personal attack from Stephen Conroy in a prepared speech the next day, including accusing Bill Morrow of acting like Sol Trujillo

Perhaps I can adapt one of the great political lines to present purposes, “I knew Sol Trujillo. Bill, you’re no Sol Trujillo.”

More importantly, under a Coalition government, there is a very different attitude about the public policy challenges Australia faces in broadband and telecommunications – and of course more generally.

We do not believe all wisdom lies in Canberra.

We welcome informed contributions to the debate, particularly from players with a valuable and important perspective like Vodafone.

That is why I am particularly pleased to be here today as this report is being launched.

Of course it is Vodafone’s report, prepared by the McKell Institute, it is not a government report, and these are Vodafone’s conclusions and recommendations, not the government’s.

However we will certainly study it and take account of it as we develop our thinking in relation to the National Broadband Network, just as we will take account of input from other sources.

What I can say is that the central thesis of this report is one that certainly makes sense: to think about broadband policy – and the taxpayer funded NBN – in isolation from mobile networks and services is to risk missing real public policy opportunities.  

I want to draw out three implications of that point in the time available to me, which I think emerge from or are illustrated by the report.

The first is how rapidly the picture has changed – so that today consumers obtain broadband services in an integrated way over both fixed and wireless networks, and expect to do so, in a way which did not happen nearly so much even five years ago, and certainly not ten years ago.

The second is the importance of competition in delivering wireless services, and the tension between that and the brutally challenging economics of serving rural and remote Australia – which raises the obvious question of whether the taxpayer funded NBN, or other public policy measures, can assist.

Third, I want to highlight the vital importance of competition in driving market-based decision making, especially in a sector as fast moving as broadband.

Turning to the first point, this report offers some really excellent perspectives on how quickly broadband over mobile devices has become part of day to day life. The report highlights the arrival of the iPhone as a real turning point. A little later, the iPad, and other tablets, revolutionised the viewing experience for many people. Pay TV operators like Foxtel and Fetch have impressive stories about their customers viewing services on the iPad; there are similar anecdotes about the ABC’s iView usage over tablet devices.

It was only a few short years before the iPhone that the 3G dongle, plugged into the side of a laptop, was a new and convenient way of getting internet connectivity over a mobile network. Since that time the number of broadband data services sold over the 3G and now the 4G networks has exploded.

The report also brings out very well the point that people have rapidly become used to services which draw on the fixed and wireless networks operating together.   We use our smartphones on the 3G or 4G networks of the carriers when out and about; at home or in an airport lounge we use them on a Wi-Fi network.

Now Wi-Fi obviously is wireless for the last ten or twenty metres but runs over the fixed network before that. Less obviously, depending on where you are, the 3G or 4G service you are using may connect to a base station only a short distance away – for example if it is a home femtocell, or if you are in a high traffic location where there are large numbers of cells, such as in major public buildings – and run over the fixed network after that.

As the report points out, much of this was not in contemplation at the time Labor announced its first version of NBN in March 2007, nor when Stephen Conroy and Kevin Rudd went through their now notorious detailed public policy planning process on a plane flight before announcing their second version of NBN in April 2009.

Which brings me to the second point: is there more we could do with the NBN to address some of these issues? If mobile devices are today an extremely important way of accessing broadband services, then what are the challenges to the wide availability of mobile broadband? The question arises particularly when it comes to the brutally challenging economics of serving rural and remote Australia.

NBN Co is building out a national fixed wireless network with a couple of thousand base stations. To take one question, if NBN Co builds a tower to deliver fixed wireless services, could that tower also be used by a mobile operator to deliver mobile wireless services? Would that make it cheaper and easier for mobile operators to serve larger areas of rural and regional Australia than they presently do? In the economic jargon, are there economies of scope between building a fixed wireless network and a mobile wireless network?

This is a question to which the previous government seemed curiously indifferent. By contrast, the Coalition – with our much stronger interest in and representation of non-metropolitan Australians than our political opponents – is very much interested in this question.

Let me quote from what we said in our broadband policy released earlier this year:

Wherever possible, the Coalition will ensure that NBN Co assets such as towers or backhaul will be made available to carriers to facilitate improved services.

The Coalition will be mindful of competition as well as broadband policy objectives in considering opportunities to alter the fixed wireless rollout.

The Coalition welcomes proposals from interested parties (including existing carriers and network or infrastructure operators) regarding contractually feasible adjustments to the fixed wireless rollout which: improve the quality/coverage of mobile services in regional areas; increase competition and choice for regional mobile consumers; reduce the net cost of the fixed wireless network; or address ‘black spots’.

We will have more to say in due course about our thinking in this area, particularly as we work through the strategic review which is presently underway into NBN Co. But I do want to expand for one moment on the reference to backhaul in our policy document.

It is not immediately obvious to those outside the telecommunications industry what ‘backhaul’ is, let alone why it is so important in stimulating or retarding competition in rural Australia. Backhaul is the industry’s jargon term for the fixed connection running from the base station back into the network. Typically this is either an optical fibre or a microwave link.

In other words, if you are a carrier considering building a new base station in a rural area, you not only have to worry about the cost of the tower and the electronics; you also have to worry about the cost of building a fibre optic or microwave link to go to that tower – and it may need to run for 10, 20 or 50 kilometres before it connects to the nearest existing piece of the fixed network.

Of course, NBN Co will have backhaul to all of the towers in its network. Under the previous government, however, it seemed NBN Co had little appetite to sell backhaul to mobile operators. We take a different view, and if NBN Co can make the economics work we will certainly not be standing in their way.

Let me come to the third observation which strikes me as I read this impressive report commissioned by Vodafone. It really does highlight how fast moving the broadband and telecommunications sector is.

One of the great merits of competition is that private sector players are better able to respond quickly to changing trends – and if they are under competitive pressure they will have the motivation as well as the means to do so.

The mobile sector historically has been substantially more competitive in Australia than the fixed sector. Vodafone has been a vigorous participant since first winning a GSM licence in the early nineties.

Following its merger with Hutchison the company has had its well publicised difficulties; given the importance of competition we have reason to welcome the demonstrated will of the company’s shareholders to invest further to get the company back into a stronger position locally.

More broadly, though, we have seen across the industry an impressive degree of innovation over more than twenty years, with new technologies introduced at a regular rate, from AMPS to GSM to CDMA to 3G to now 4G.   That is testament to what competition can drive – and what is at risk if you do not have strong competition.

In opposition we expressed concern about the previous government’s broadband policy settings harming competition, and in particular having a dampening effect on mobile competition.

It does not need to be that way, and as I have highlighted we are keen to explore ways in which the NBN can support rather than supress competition – including in the vital mobile sector.

Congratulations Bill on commissioning and releasing this important report and Michael for writing it.

Let me know exercise the magic power which is conferred upon you when you become a member of parliament, as both I and Michelle have discovered, which is to declare things ‘opened’ or ‘launched’, and declare this important report launched.

Thank you very much – and I look forward to a continuing vigorous competitive contribution from Vodafone around Australia.

Authorised by Paul Fletcher MP, Level 2, 280 Pacific Highway Lindfield NSW 2070.

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